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Interactive Quiz 0078110874 1 5 no Accounting in Bu 1

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1 INCORRECT

Which one of the following users of accounting information is considered to be an external user of accounting information rather than an internal user of accounting information? A) B) C) D) Internal auditors. Company managers. Company customers. Officers and directors.

Budget officers. E) Feedback: Internal auditors are considered to be internal users. C2

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2 INCORRECT

A CPA owns a large home and she has divided the second floor into two separate units: one used as her personal residence and the other rented out to local college students as an apartment. On the first floor, she has her own CPA firm where she meets with and provides accounting services to clients. If she wishes to keep separate records for each of these three activities, the accounting principle to which she is adhering is? A) B) C) D) Going-concern principle. Monetary unit principle. Cost principle. Business entity principle.

Conservatism principle. E) Feedback: The going concern principle means that accounting information reflects an assumption that the business will continue operating instead of being closed or sold. C4
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3 INCORRECT

The three basic business entities discussed in this chapter include sole proprietorship, partnership, and corporation. Which of these entities is considered a legal entity and is also subject to federal income taxation at the entity level? Sole proprietorship.

A) Partnership. Corporation. All three entities satisfy both requirements.

B) C) D)

None of these entities satisfy both requirements. E) Feedback: A sole proprietorship is not subject to federal income taxation at the entity level. C4
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4 INCORRECT

The basic accounting equation is Assets = Liabilities + Equity. The Equity term of the equation can be further broken down into several other terms. Assume that the entity is a sole proprietorship. Which of the following statements is correct? Additional investments by the business owner will increase equity; and A) revenues will decrease equity. Additional investments by the business owner will decrease equity; and B) revenues will increase equity. Increases in expenses will decrease equity; and owner withdrawals will C) decrease equity. D) Revenues will increase equity; and owner withdrawals will increase equity.

Revenues will decrease equity; and owner withdrawals will increase equity. E) Feedback: The Equity term of the basic accounting equation is expanded to read: Beginning Owner's Equity + Additional Investments by the Owner Owner Withdrawals + Revenues Expenses = Ending Owner's Equity. Using this expanded formula, it can be seen that revenues will increase (rather than decrease) equity. A1
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5 INCORRECT

If at the end of the accounting period, the company's liabilities total $19,000 and its equity totals $40,000, then what must be the total of assets? A) B) C) D) $14,000. $40,000. $21,000. $59,000.

None of the above. E) Feedback: The accounting equation is Assets = Liabilities + Equity. A1
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6 CORRECT

Company assets total $150,000 and its liabilities total $30,000. What is the equity of this company? A) B) C) D) $120,000. $100,000. $150,000. $180,000.

None of the above. E) Feedback: The accounting equation is Assets = Liabilities + Equity. $150,000 = $30,000 + $120,000. A1
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7 INCORRECT

If during the current accounting period, the company's assets increased by $24,000 and equity increased by $5,000, then how did liabilities change? A) B) C) D) Increased by $29,000. Increased by $24,000. Decreased by $5,000. Decreased by $19,000.

Increased by $19,000. E) Feedback: The accounting equation is Assets = Liabilities + Equity. A1

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8 INCORRECT

Assume that a company's beginning owner's capital was $20,000. During the period, withdrawals were $24,000, and the owner made additional investments during the period of $50,000. The ending capital balance was $90,000. What was the net income or net loss for the period? A) B) C) D) Net income, $56,000. Net loss, $44,000. Net income, $44,000. Net income, $30,000.

None of the above. E) Feedback: Beginning owner's capital + Investments + Net income Net Loss Withdrawals = Ending capital. P2
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9 INCORRECT

If during the accounting period, the company's assets decreased by $15,000, and equity increased by $4,000, then by how much did liabilities change? A) B) C) D) Increased by $12,000. Increased by $8,000. Decreased by $12,000. Decreased by $19,000.

Decreased by $6,000. E) Feedback: The accounting equation is Assets = Liabilities + Equity. A1

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10 INCORRECT

Which of the following financial statements refers to a specific date (point in time)? A) B) C) D) Income statement. Statement of owner's equity. Statement of cash flows. Balance sheet.

Answers A, B & C are all correct. E) Feedback: The income statement is a dynamic statement showing changes or accumulated totals oveover a period of time, such as one month, one quarter, or one year. P2
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11 INCORRECT

Total assets and total liabilities of a company are reported on which of the following? A) B) C) D) Income statement. Balance sheet. Statement of cash flows. Statement of owner's equity.

None of the above. E) Feedback: The income statement reports the revenues, expenses, and net

income (or net loss) of the company. P2

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12 INCORRECT

A statement of cash flows will report cash flows from which of the following activities? A) B) C) D) Operating activities. Investing activities. Financing activities. All of the above.

Only A and C are correct. E) Feedback: Operating activities are not the only activities reported on the statement of cash flows. P2
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13 INCORRECT

When cash is received from a customer in payment of an account receivable, how are the elements of the accounting equation affected? A) B) C) D) Decrease assets (cash) and increase assets (accounts receivable). Increase assets (cash) and decrease assets (accounts receivable). Increase assets and increase liabilities. Increase assets and increase equity.

None of the above. E) Feedback: Cash is received (rather than decreased) and accounts receivable is decreased (rather than increased) when cash is received from a customer for payment of an account receivable. P1
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14 INCORRECT

The owner's investment of cash in the company will result in which of the following? A) B) C) D) An increase in cash and a decrease in equity. An increase in cash and an increase in equity. A decrease in cash and a decrease in liabilities. An increase in fees earned and an increase in equity.

An increase in cash and an increase in liabilities. E) Feedback: The balance of the capital will increase (rather than decrease)

when an owner invests cash in the company. P1

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15 INCORRECT

Purchasing equipment on account (payment to be made in the future) will have what effect on the elements of the accounting equation? A) B) C) D) E) Increase in equipment (assets) and a decrease in equity. Increase in equipment (assets) and an increase in equity. Increase in equipment (assets) and an increase in liabilities. Increase in equipment (assets) and a decrease in liabilities. None of the above.